Finance

The management of Sports Products, Inc. must be cautious and concerned with the reaction of their employees andor stockholders. The management of Sports Products, Inc. must work towards a goal of striking a balance between earning profits and having adequate beneficial corporate governance. A corporation whether it be stock or non-stock must never forget about the duties that it has both to its stockholders and to the society in general. The management has been elected or chosen by their stockholders based on the trust and capability that the latter perceives in them. Thus, these managers or officers must meet these expectations and work towards achieving the goal of bringing in profits to the company while being mindful of the ethical considerations that they have to comply with.
The firm appears to have an agency problem. This is for the reason that the employees and stockholders are having doubts about the objectives of their officers. The employees are entertaining suspicions of possible conflict of interests between the managers and the stockholders. The managers are occupying a position of trust and they have both a duty and an obligation to make sure that they are not working for their own advantage. The managers have a responsibility to its people. It is very perilous to the stability of the company if the investors or the stockholders would begin to entertain thoughts about their officers or managers being unfaithful. This might result to a possible slump in the prices of stock.
The expense being spent on pollution control is in the best interest of the company despite the seemingly adverse effects that it has because if these would not be given attention to, there would be bigger problems later on. There might be charges filed against the company for failure to accede to environmental compliance laws which would necessitate expenses for costs of litigation. If there would be victims later on who would be affected by the pollution that the company brings, this would also amount to further expenses on their part. Thus, even if there is a bad effect on profits, this is nothing compared to the long term problem that pollution might pose in the future. It would be best to prevent the problem at an early stage than to try to solve it when pollution issues gets out of control.
No, the firm does not have an effective corporate governance structure. For one, it seems that the stockholders are at a disadvantage in this scenario. There has been no distribution of dividends for the past 20 years without offering any explanation for this action. Although the right to declare dividends rests solely on the discretion of the directors, this authority cannot be abused by them. There must be adequate steps taken to ensure that the interests of the stockholders are protected above the interests of those who have control of their investments. The management of a corporation must be mindful of the position that they occupy and their actions must not be questionable or doubtful. The managers do not have an effective leadership style which might jeopardize the company.
The firm must address the issues raised by the employees. The managers must call a meeting in order to apprise the stockholders and employees as to what is really going on in the company. There must be transparency as to matters of which the stockholders have the right to know. It would be best if the officers of the corporation would be given access to the financials of the corporation to gauge the real status of its investments. If it would be impossible to meet these stockholders then there should at least be a memorandum or letter given to them to inform them of the real situation of the corporation.